Though Federal Reserve Chairman Ben S. Bernanke is likely to be confirmed for a second term, lawmakers of both parties used a hearing last week to express their concern about aspects of his job performance.
Senate Banking Committee Chairman Christopher Dodd (D-Conn.) endorsed giving Bernanke a second term, but said he remains "concerned about the weaknesses of the Federal Reserve system." He also noted he is pushing for legislation to take away some of its regulatory powers and would make changes to the structure of the Fed's regional banks.
Bernanke told lawmakers today that his agency's actions had helped avoid making the recession worse, though conceded that they could have done more.
The Fed's moves "contributed substantially to the improvement in financial conditions and to what now appear to be the beginnings of a turnaround in both the U.S. and foreign economies,'' he said during testimony before the Senate Banking Committee at his confirmation hearing for a second term.
In response to questions from committee members of both parties, Bernanke conceded that the Fed failed in some of its oversight of the actions of some of the large bank holding companies.
He told Sen. Richard Shelby (R-Ala.), the panel's top Republican, that "there have been failures all through the system.''
But Shelby pushed him harder and Bernanke said: "Did we do everything we could? Absolutely not.''
But Bernanke said the Fed's failures shouldn't mean that Congress should take away any of the Fed's powers.
"If you fight a battle and lose a battle, does that mean you never use the army again?'' Bernanke said.
In response to a question from Sen. Tim Johnson (D-S.D.), who praised Bernanke's performance as Fed chairman, Bernanke said that if lawmakers approved amendments allowing Congress to audit the Fed's decisions on monetary policy it would negatively impact the public's and market's confidence in his agency's ability to make decisions without respect to short-term political pressures.
The strongest criticism of Bernanke came from Sen. Jim Bunning (R-Ky.), who said reconfirming the chairman would be rewarding failure because the Fed failed to anticipate many of the economic difficulties and for bailing out large financial institutions.
"You are the definition of a moral hazard,'' Bunning said. "Your Federal Reserve has become the creature from Jekyll Island.''
Though Bernanke is expected to be confirmed, Sen. Bernard Sanders (I-Vt.) has said he will place a hold on the nomination because recent economic policies haven't done enough to help the middle class.--cmarx@cutimes.com